Import and export figures of Iron ore for FY15 make a classic example of antithesis. While, import rose to an all time high of 15 MnT, export has come down
Import and export figures of Iron ore for FY15 make a classic example of antithesis. While, import rose to an all time high of 15 MnT, export has come down drastically from 14.5 MnT in FY14 to 4.7 MnT in FY15. However, this antithesis bears common cause & effect elements. The cause for both import & export totals in the last fiscal were globally declining Iron ore prices and various mining bans in India. These, together with higher duty on export of the material, brought down the export figure to a level which will be historic. The severe fall in export began as early as in Q1 of FY15, i.e. around the time the mining bans were imposed, and continued until Q3. FY14 Q1, Q2 and Q3 export were 3.4 MnT, 4.8 MnT and 3.1 MnT respectively, whereas for FY15, the numbers were 1.9 MnT, 0.8 MnT and 0.7 MnT for the corresponding quarters. Only Q4 witnessed a slight increase and reached 1.21 MnT with the lifting of bans on various mines, yet remained low against the 3.4 MnT Iron ore exported in FY14 in the same quarter.
The Cause: The major reason behind low export of Indian iron ore was the globally declining prices of the material in the past year. Brazilian, Australian & South African miners revved up their production of the ore and offered it at prices so competitive that the Indian miners struggled but couldn’t keep up. Depreciating Rand in South Africa was a major determinant due to which, the global prices tethered towards the lower end. The 30% duty imposed by the Indian government on export of Iron ore since 2012 further dampened whatever export was possible. A three times higher differential railway freight charge for export on top of high export duty left the exporters without options. Most of the export of low quality Iron ore from India takes place from Goa, but that too has been negligible since the 2012 ban.
Accounting for the 4.7 MnT Export: The largest chunk, 2.6 MnT, was exported by NMDC from Vizag Port. A little over 0.8 MnT was exported via Paradip Port. The quantity exported from Paradip resulted from stock clearance of the Ore from the port before renewal and/or auctions of plots. Since no mining is taking place in Goa, only close to 0.4 MnT of the material was exported from Panaji Port on account of 7-8 conditional auctions of available stock in the past year. Various smaller quantities were exported from Redi, Haldia, Mormugao and other ports. Top countries to which the exports were made are South Korea, Japan and China.
FY16 Expectations: Not much of a change is expected in FY16 for Iron ore export. Foreign miners are likely to keep increasing production which will keep the global prices low. Although, the production of Iron ore in India is expected to increase in FY16 to 142 MnT from the 120 MnT produced in FY15, export quantity is likely to hover around 4-5 MnT in the face of combined global and domestic production scenario.